What changed
The Cash Reserve Ratio for scheduled state co-operative banks was increased by 25 basis points, from 8.00% to 8.25% of net demand and time liabilities. This change takes effect from the fortnight starting May 24, 2008, as per the Governor's Annual Policy statement for 2008-09.
What it means for you
Banks will need to set aside a larger portion of their deposits with RBI, reducing lendable resources. This move aims to absorb excess liquidity and curb inflationary pressures, impacting profitability and loan growth for co-operative banks.
What you must do
- Recalibrate liquidity buffers to meet the higher CRR of 8.25% from May 24, 2008.
- Review loan disbursement schedules to align with tighter cash reserve requirements.
- Communicate the revised CRR impact to treasury and ALM teams for compliance.
- Monitor fortnightly NDTL calculations to avoid penalties for shortfall.
Who it affects
Scheduled state co-operative banks, Treasury departments of co-operative banks, ALM and compliance teams
When does the new CRR rate become effective?
The 8.25% CRR applies from the fortnight beginning May 24, 2008.
What is the basis for this CRR hike?
The hike was announced in the Governor's Annual Policy statement for 2008-09, citing a review of the evolving liquidity situation.
Does this apply to all co-operative banks?
No, it specifically applies to scheduled state co-operative banks, as per Section 42(1) of the RBI Act, 1934.